Bank of Japan ends era of negative interest rates after 17 years

The Bank of Japan (BOJ) has increased interest rates from -0.1% to a range of 0.0-0.1%. This notable adjustment marks the first change of its kind in 17 years. Consequently, there are now no countries worldwide maintaining negative interest rates.

In 2022, money.pl highlighted that Japan, ranking as the world's third-largest economy and a leading foreign investor in Poland outside of Europe, was grappling with several challenges, notably a depreciating currency.

The pivotal decision was made after the nation's leading companies began raising their employees' wages in early March to alleviate the impact of the rising cost of living in Japan, according to BBC's Nobuko Kobayashi from consulting firm EY-Panthenon.

In March, wages at Japan's major corporations saw a 5.28% increase compared to the previous year, marking the most substantial rise in thirty years. Historically, Japan's cost of living has been relatively stable, occasionally decreasing, which has kept wages from rising significantly.

"It's positive for Japan to boost local productivity and demand. However, it's concerning if inflation is driven by external factors, like wars or supply chain disruptions," Kobayashi noted.

During the COVID-19 pandemic, central banks globally slashed interest rates dramatically to shield their economies from recession. Some, including the European Central Bank and the Swiss National Bank, resorted to negative interest rates. Post-pandemic, in an effort to curb escalating prices, central banks across the globe, including those in the USA and the United Kingdom, started to aggressively increase interest rates.